Learn the pros and cons of various forms of financing
There are many different ways to obtain additional financing for your business. Each financing method choice has positives and negatives for you to consider.
No one financing choice is right for every situation or company. As business finance experts who want to see good businesses grow, we want you to make the best decision for your company and its needs. This chart lays out many of the financing options that are available today and explains the good and bad of each:
| Option |
Pros |
Cons |
| Bank Line of Credit |
- You choose the management of your company.
- You retain ownership of your company.
- Relatively low cost.
- You benefit from growth upside.
|
- Line is limited to what the bank will approve and is often slow to grow.
- There may be many requirements and restrictions.
- You will have to deal with a credit committee.
- Bank will require a personal guarantee.
- You may have to submit to regular audits at your expense.
- Bank will look at your past and your company's past.
- Banks generally do not like fast growth
|
| Venture Capital |
- Lots of money potentially available.
- Allows your company to achieve its full growth potential.
- Founder may receive a decent exit package.
- No personal guarantee required.
|
- You will lose control of ownership of the company
- You will give up management authority.
- Your company will eventually be sold or merged.
- Not a good choice unless you have the potential for dramatic growth
|
| New Investor/ Partner |
- Requires fewer covenants than a bank.
- No personal guarantee requried
|
- You will forfeit some, if not all, control of ownership
- You will have to share the benefits of growth upside.
- There is limited money available.
- Problematic if it doesn't work out.
- You have to consider the "personal" aspect - do you get along?
|
| Loans from family and/or friends
|
- Can be easy to obtain.
- Few - if any - covenants.
- You retain control of company.
- You benefit from growth upside.
- No personal guarantee required.
- Cost and terms of financing is more negotiable
|
- Money limited to what friends and family are willing to offer
- Social tensions if things don't go as planned or if you are slow to repay
|
| Capital Solutions Accounts Receivable Financing |
- No interference with your management choices.
- You retain control of your company.
- You benefit from growth upside.
- No personal guaranty required.
- Money available depends on your growth and invoices.
- Allows full growth potential of company.
- Fewer covenants than a bank.
- Easy to qualify.
- Fast decisions.
- No audits.
- You can leave the relationship at anytime, with zero penalties
|
- In return for the convenience, speed and ease of qualification, some costs may be slightly higher than other financing methods.
|
Contact us today and speak with one of our business financing executives. We are happy to openly and honestly explain more about the financing options available and we will give you any information you need to help you make the right choice for you and your company.
